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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number 001-35023

iBio, Inc.

(Exact name of registrant as specified in its charter)

Delaware

 

26-2797813

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

 

 

8800 HSC Parkway, Bryan, TX

 

77807-1107

(Address of principal executive offices)

 

(Zip Code)

(979) 446-0027

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Ticker symbol(s)

 

Name of each exchange on which registered

Common Stock

 

IBIO

 

NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes    No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

 

 

 

Accelerated filer 

Non-accelerated filer  

Smaller reporting company  

 

 

 

 

 

 

Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes    No 

Shares of Common Stock outstanding as of May 17, 2021:   217,850,344


Table of Contents

iBio, Inc .

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

3

 

 

Item 1.

Financial Statements (Unaudited)

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

38

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

45

Item 4.

Controls and Procedures

45

 

 

 

PART II. OTHER INFORMATION

46

 

 

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 5.

Other Information

52

Item 6.

Exhibits

53

 

 

SIGNATURES

55

2


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PART I - FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited).

iBio, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In Thousands, except share and per share amounts)

March 31, 

June 30, 

2021

2020

(Unaudited)

(See Note 2)

Assets

Current assets:

Cash and cash equivalents

$

84,627

$

55,112

Accounts receivable - trade

 

387

 

75

Accounts receivable - unbilled

1

Subscription receivable

5,549

Investments in debt securities

19,296

Work in process

 

432

 

798

Prepaid expenses and other current assets

 

2,460

 

214

Total Current Assets

 

107,203

 

61,748

 

 

Note receivable and accrued interest

1,537

Finance lease right-of-use assets, net of accumulated amortization

26,380

27,616

Fixed assets, net of accumulated depreciation

 

6,407

 

3,657

Intangible assets, net of accumulated amortization

 

1,146

 

1,144

Security deposit

 

24

 

24

Total Assets

$

142,697

$

94,189

 

 

Liabilities and Equity

 

 

Current liabilities:

 

 

Accounts payable (related parties of $100 and $6 as of March 31, 2021 and June 30, 2020, respectively)

$

1,631

$

1,759

Accrued expenses (related party of $842 and $705 as of March 31, 2021 and June 30, 2020, respectively)

 

2,666

 

1,105

Finance lease obligation – current portion

318

301

Note payable – PPP loan – current portion

566

261

Deferred revenue / Contract liabilities

 

886

 

1,810

Total Current Liabilities

 

6,067

 

5,236

 

 

Note payable – PPP Loan – net of current portion

34

339

Finance lease obligation – net of current portion

31,766

32,007

 

 

Total Liabilities

 

37,867

 

37,582

 

 

Commitments and Contingencies

 

 

 

 

Equity

 

 

iBio, Inc. Stockholders’ Equity:

 

 

Preferred stock – no par value; 1,000,000 shares authorized;

 

 

iBio CMO Preferred Tracking Stock; 1 share authorized, issued and outstanding as of both March 31, 2021 and June 30, 2020

 

 

Series B Convertible Preferred Stock - $1,000 stated value; 5,785 shares authorized; 0 and 5,785 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively

 

 

Common stock - $0.001 par value; 275,000,000 and 275,000,000 shares authorized at March 31, 2021 and June 30, 2020, respectively; 216,133,544 and 140,071,110 shares issued and outstanding as of March 31, 2021 and June 30, 2020, respectively

 

216

 

140

Additional paid-in capital

 

278,442

 

206,931

Accumulated other comprehensive loss

 

(70)

 

(33)

Accumulated deficit

(173,743)

(150,420)

Total iBio, Inc. Stockholders’ Equity

 

104,845

 

56,618

Noncontrolling interest

 

(15)

 

(11)

Total Equity

 

104,830

 

56,607

Total Liabilities and Equity

$

142,697

$

94,189

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited; in Thousands, except per share amounts)

    

Three Months Ended

Nine Months Ended

March 31, 

March 31, 

    

2021

    

2020

2021

    

2020

Revenues

$

765

$

96

$

1,880

$

518

 

 

 

 

Cost of goods sold

493

86

1,275

404

Gross profit

272

10

605

114

Operating expenses:

 

 

 

 

Research and development (related party of $0, $0, $0 and $97)

 

2,162

 

1,095

 

6,892

 

2,990

General and administrative (related party of $491, $316, $1,394 and $941)

 

5,313

 

2,979

 

15,385

 

8,198

Total operating expenses

 

7,475

 

4,074

 

22,277

 

11,188

 

 

 

 

Operating loss

 

(7,203)

 

(4,064)

 

(21,672)

 

(11,074)

 

 

 

 

Other income (expense):

 

 

 

 

Interest expense (related party of $610, $616, $1,836 and $1,851)

(612)

(616)

(1,841)

(1,851)

Interest income

 

152

 

4

 

183

 

12

Royalty income

 

1

 

 

3

 

9

 

 

 

 

Total other income (expense)

 

(459)

 

(612)

 

(1,655)

 

(1,830)

 

 

 

 

Consolidated net loss

 

(7,662)

 

(4,676)

 

(23,327)

 

(12,904)

Net loss attributable to noncontrolling interest

 

1

 

 

4

 

3

Net loss attributable to iBio, Inc.

 

(7,661)

 

(4,676)

 

(23,323)

 

(12,901)

Deemed dividends – down round of Series A Preferred and Series B Preferred

(21,560)

Preferred stock dividends – iBio CMO Tracking Stock

 

(64)

 

(65)

 

(195)

 

(196)

Net loss attributable to iBio, Inc. stockholders

$

(7,725)

$

(4,741)

$

(23,518)

$

(34,657)

 

 

 

 

Comprehensive loss:

 

 

 

 

Consolidated net loss

$

(7,662)

$

(4,676)

$

(23,327)

$

(12,904)

Other comprehensive loss - unrealized loss on debt securities

(16)

(36)

Other comprehensive loss - foreign currency translation adjustments

 

 

(1)

 

 

(2)

 

 

 

 

Comprehensive loss

$

(7,678)

$

(4,677)

$

(23,363)

$

(12,906)

 

 

 

 

Loss per common share attributable to iBio, Inc. stockholders - basic and diluted

$

(0.04)

$

(0.06)

$

(0.12)

$

(0.74)

 

 

 

 

Weighted-average common shares outstanding - basic and diluted

 

215,539

 

79,917

 

188,493

 

47,018

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity (Deficiency)

(Unaudited; in thousands)

Nine Months Ended March 31, 2021

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Noncontrolling 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Loss

 

Deficit

 

Interest

 

Total

Balance as of July 1, 2020

6

$

140,071

$

140

$

206,931

$

(33)

$

(150,420)

$

(11)

$

56,607

Capital raises

11,292

11

32,111

32,122

Costs to raise capital

  

  

  

  

  

  

  

  

(1,525)

  

  

  

  

  

  

  

  

(1,525)

Exercise of stock options

30

28

28

Conversion of preferred stock to common stock

(6)

  

28,925

29

(29)

Share-based compensation

  

  

  

  

  

351

  

  

  

  

351

Unrealized loss on debt securities

 

 

 

(7)

 

 

 

(7)

Net loss

 

 

 

 

(7,533)

 

(1)

 

(7,534)

Balance as of September 30, 2020

180,318

180

237,867

(40)

(157,953)

(12)

80,042

Capital raises

31,451

 

32

 

38,243

 

 

 

 

38,275

Costs to raise capital

 

 

(3,117)

 

 

 

 

(3,117)

Share-based compensation

 

 

265

 

 

 

 

265

Unrealized loss on debt securities

(13)

(13)

Net loss

 

 

 

 

(8,129)

 

(2)

 

(8,131)

Balance as of December 31, 2020

211,769

212

273,258

(53)

(166,082)

(14)

107,321

Capital raises

4,354

 

4

 

4,880

 

 

 

 

4,884

Costs to raise capital

10

 

 

(71)

 

 

 

 

(71)

Exercise of stock options

1

1

Share-based compensation

 

 

374

 

 

 

 

374

Foreign currency adjustment

 

(1)

 

 

(1)

Unrealized loss on debt securities

(16)

(16)

Net loss

 

 

 

 

(7,661)

 

(1)

 

(7,662)

Balance as of March 31, 2021

$

216,133

$

216

$

278,442

$

(70)

$

(173,743)

$

(15)

$

104,830

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Condensed Consolidated Statements of Equity (Deficiency)

(Unaudited; in thousands)

Nine Months Ended March 31, 2020

Accumulated

Additional

Other

Preferred Stock

Common Stock

Paid-In

Comprehensive

Accumulated

Noncontrolling 

 

Shares

 

Amount

 

Shares

 

Amount

 

Capital

 

Loss

 

Deficit

 

Interest

 

Total

Balance as of July 1, 2019

10

$

20,152

$

20

$

108,295

$

(31)

$

(105,821)

$

(6)

$

2,457

Conversion of preferred stock to common stock

(4)

4,000

4

(4)

Share-based compensation

  

  

  

  

  

  

  

  

68

  

  

  

  

  

  

  

  

68

Foreign currency translation adjustment

(1)

(1)

Net loss

 

 

 

 

(4,463)

 

(1)

 

(4,464)

Balance as of September 30, 2019

  

6

  

  

24,152

  

24

  

108,359

  

(32)

  

(110,284)

  

(7)

  

(1,940)

Capital raise

5

2,450

 

2

 

4,513

 

 

 

 

4,515

Cost to raise capital

 

 

(60)

 

 

 

 

(60)

Compensation shares

500

 

1

 

(1)

 

 

 

 

Exercise of warrants

3,140

3

688

691

Deemed dividends – down round of Series A and Series B Preferred

21,560

(21,560)

Conversion of preferred stock to common stock

(5)

24,325

25

(25)

Share-based compensation

37

37

Foreign currency translation adjustment

1

1

Net loss

 

 

 

 

(3,762)

 

(2)

 

(3,764)

Balance as of December 31, 2019

6

54,567

55

135,071

(31)

(135,606)

(9)

(520)

Warrant exchange

15,000

 

15

 

3,285

 

 

(3,300)

 

 

Issuance of notes under warrant exchange

 

 

 

 

(3,300)

 

 

(3,300)

Capital raise

5,000

 

5

 

5,761

 

 

 

 

5,766

Cost to raise capital

 

 

(321)

 

 

 

 

(321)

Compensation shares

816

 

 

 

 

 

 

Exercise of warrants

31,860

32

6,912

6,944

Exercise of stock options

4

3

3

Conversion of preferred stock to common stock

113

Share-based compensation

63

63

Foreign currency translation adjustment

(2)

(2)

Net loss

 

 

 

 

(4,676)

 

 

(4,676)

Balance as of March 31, 2020

6

$

107,360

$

107

$

150,774

$

(33)

$

(146,882)

$

(9)

$

3,957

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited; in Thousands)

    

Nine Months Ended

March 31, 

    

2021

    

2020

Cash flows from operating activities:

Consolidated net loss

$

(23,327)

$

(12,904)

Adjustments to reconcile consolidated net loss to net cash used in operating activities:

 

 

Share-based compensation

 

990

 

168

Amortization of intangible assets

 

218

 

225

Amortization of finance lease right-of-use assets

1,236

1,246

Depreciation of fixed assets

 

330

 

207

Accrued interest income on note receivable

(37)

Amortization of premiums on debt securities

130

Reserve for loss on contract

300

Changes in operating assets and liabilities:

 

 

Accounts receivable – trade

 

(312)

 

22

Accounts receivable – other

(1)

Work in process

 

366

 

Prepaid expenses and other current assets

 

(2,247)

 

101

Accounts payable

 

(303)

 

(440)

Accrued expenses

 

743

 

169

Deferred Revenue / Contract liabilities

 

(924)

 

1,728

 

 

Net cash used in operating activities

 

(22,838)

 

(9,478)

 

 

Cash flows from investing activities:

 

 

Purchases of debt securities

(20,963)

Issuance of convertible promissory note receivable

Additions to intangible assets

 

(201)

 

(63)

Purchases of fixed assets

 

(2,406)

 

(271)

Redemption of debt securities

1,500

Issuance of note receivable

(1,500)

 

 

Net cash used in investing activities

 

(23,570)

 

(334)

 

 

Cash flows from financing activities:

 

 

Proceeds from sales of preferred and common stock

 

75,281

 

10,281

Proceeds from subscription receivable

5,549

Proceeds from exercise of stock option

Proceeds from exercise of warrants

6,330

Proceeds from the exercise of stock options

29

3

Costs to raise capital

 

(4,713)

 

(381)

Payments of notes payable – warrant exchange

(800)

Payment of finance lease obligation

(223)

 

  

 

  

Net cash provided by financing activities

 

75,923

 

15,433

 

 

Effect of exchange rate changes

 

 

(2)

 

 

Net increase in cash and cash equivalents

 

29,515

 

5,619

Cash - beginning of period

 

55,112

 

4,421

Cash - end of period

$

84,627

$

10,040

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited; in Thousands)

    

Nine Months Ended

March 31, 

    

2021

    

2020

Schedule of non-cash activities:

 

 

Unpaid fixed assets included in accounts payable and accrued expenses

$

943

$

Conversion of preferred stock into common stock

$

29

$

29

Unpaid intangible assets included in accounts payable

$

19

$

Unrealized loss on available-for-sale debt securities

$

36

$

Increase in ROU assets under ASC 842

$

$

7,489

Deemed dividends – down round of Series A Preferred and Series B Preferred

$

$

21,560

Issuances of common stock under warrant exchange

$

$

3,300

Issuances of notes payable under warrant exchange

$

$

3,300

Cashless exercise of warrants reducing balance owed for notes payable – warrant exchange

$

$

1,304

Intangible assets included in accounts payable in prior period, paid in current period

$

$

8

Compensation shares

$

$

1

 

 

Supplemental cash flow information:

 

 

Cash paid during the period for interest

$

1,839

$

1,756

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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iBio, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.   Nature of Business

iBio, Inc. (“we”, “us”, “our”, “iBio”, “Ibio, Inc” or the “Company”) is a biotechnology company and biologics contract development and manufacturing organization (“CDMO”). The Company applies its licensed and owned technologies to develop novel products to fight fibrotic diseases, cancers, and infectious diseases. The Company uses its FastPharming® Development and Manufacturing System (the “FastPharming System”) to increase “speed-to-clinic” for new candidates. The Company is also using the FastPharming System to create proteins for research and development (“R&D”) as well as further manufacturing uses, including 3D-bioprinting. In addition, the Company makes the FastPharming System available to clients on a fee-for-service basis for the production of proteins.

During the year ended June 30, 2020, the Company operated in two segments: (i) its biologics development and licensing activities, conducted within iBio, Inc., and (ii) its CDMO segment, operated via its subsidiary iBio CDMO LLC (“iBio CDMO”). In the past, the Company’s primary focus was the CDMO business, pursuant to which iBio CDMO provided manufacturing services to collaborators and third-party customers as well as to the Company for its own product development purposes. However, starting in the second half of 2020 and thereafter, the Company shifted its primary focus to its biologics development programs, including new vaccines and therapeutics.

The Company’s current platforms and programs include: (i) the development of therapeutics, for which the Company intends to conduct preclinical and clinical trials; (ii) the development of vaccines, for which the Company intends to conduct preclinical and clinical trials; (iii) CDMO services using its licensed and owned FastPharming System and GlycaneeringTM Services; and (iv) the production of proteins for research and further manufacturing for use in multiple other bioprocess applications. The Company is developing a portfolio of technologies, products, and services driven by the following platforms and programs, which it intends to use individually, and in combination:

Therapeutics

oTreatments for fibrotic diseases, including a fusion of the endostatin-derived E4 antifibrotic peptide to the hinge and heavy chain of human IgG1 (“IBIO-100”, formerly described as “CFB-03”) for systemic scleroderma (for which we have received orphan drug designation), idiopathic pulmonary fibrosis, and related conditions.
oAn ACE2-Fc fusion protein as a treatment for COVID-19 and, prospectively, other diseases emanating from the Coronaviridae family, in-licensed from Planet Biotechnology, Inc.

Vaccines

oA novel subunit vaccine candidate targeting the nucleocapsid protein being designed for the prevention of SARS-CoV-2 infection. (IBIO-202).
oAn E2 antigen, in combination with a selected adjuvant, for vaccination of pigs against classical swine fever (“IBIO-400”).

CDMO Services

oProcess development and manufacturing of protein products in hydroponically-grown, transiently-transfected plants, (typically Nicotiana benthamiana, a relative of the tobacco plant) using the Company’s proprietary expression technologies, GlycaneeringTM Services, and production know-how (the FastPharming System), deployed in its 130,000 square-foot manufacturing facility in Bryan, Texas.

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oOur contract development and manufacturing services include:

Process Development

Feasibility assessment and development of manufacturing processes using the FastPharming System. Product optimization via our GlycaneeringTM Services that may be used to enhance the quality and performance of therapeutic proteins via plant-based glycosylation controls.

Manufacturing

Biologics production using the FastPharming System.

Fill / Finish

Aseptic vial and bottle filling and finishing services.

BioAnalytic

Method development and validation, including protein characterization using mass spectrometry.

Factory Solutions

For the clients who seek to insource biologics manufacturing using the FastPharming System and instead of outsourcing production to iBio CDMO.

Research & Bioprocess Products

oProteins for use in biofabrication of tissues and organs.
oCytokines and growth factors for cell culture applications.
oOther biologics for use in a range of life science research, development, and bioprocessing applications.

Our Subsidiaries

iBio was established as a public company in August 2008 as the result of a spinoff from Integrated BioPharma, Inc., iBio’s wholly-owned and majority-owned subsidiaries are as follows:

iBio CDMO– iBio CDMO is a Delaware limited liability company formed on December 16, 2015 as iBio CMO, LLC to develop and manufacture plant-made pharmaceuticals and provide related services to clients. Effective July 1, 2017, iBio CMO changed its name to iBio CDMO. As of December 31, 2015, the Company owned 100% of iBio CDMO. On January 13, 2016, the Company entered into a contract manufacturing joint venture with an affiliate of Eastern Capital Limited (“Eastern”), a stockholder of the Company at that time (the “Eastern Affiliate”). The Eastern Affiliate contributed $15 million in cash for a 30% interest in iBio CDMO. The Company retained a 70% interest in iBio CDMO and contributed a royalty-bearing license which grants iBio CDMO a non-exclusive license to use the Company’s proprietary technologies for research purposes and an exclusive U.S. license for manufacturing purposes. The Company retained the exclusive right to grant product licenses to those who wish to sell or distribute products made using the Company’s technologies.

On February 23, 2017, the Company entered into an exchange agreement with the Eastern Affiliate, pursuant to which the Company acquired substantially all of the interest in iBio CDMO held by the Eastern Affiliate in exchange for one share of the Company’s iBio CMO Preferred Tracking Stock, par value $0.001 per share. After giving effect to the transaction, the Company owns 99.99% of iBio CDMO. See Note 12 - Stockholders' Equity for a further discussion. At any time, at the Company’s election or the election of the Eastern Affiliate, the outstanding share of iBio CMO Preferred Tracking Stock may be exchanged for 29,990,000 units of limited liability company interests of iBio CDMO. Following such exchange, we would own a 70% interest in iBio CDMO and the Eastern Affiliate would own a 30% interest.

iBio CDMO’s operations take place in Bryan, Texas in a facility controlled by another affiliate of Eastern (the “Second Eastern Affiliate”) as sublandlord. The facility is a 130,000-square foot Class A life sciences building located on land owned by the Texas Agricultural and Mechanical College of Texas (“Texas A&M”) system, designed and equipped for plant-made manufacture of biopharmaceuticals. The Second Eastern Affiliate granted iBio CDMO a 34-year lease (the "Sublease") for the facility as well as certain equipment (see Note 11 - Finance

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Lease Obligations). iBio CDMO commenced commercial operations in January 2016. iBio CDMO expects to operate as described above.

iBIO DO BRASIL BIOFARMACÊUTICA LTDA (“iBio Brazil”) – iBio Brazil is a subsidiary organized in Brazil in which the Company has a 99% interest. iBio Brazil was formed to manage and expand the Company’s business activities in Brazil. The activities of iBio Brazil are intended to include coordination and expansion of the Company’s existing relationship with Fundacao Oswaldo Cruz/Fiocruz (“Fiocruz”), with whom we have previously partnered with on a Yellow Fever Vaccine program and development of additional products with private sector participants for the Brazilian market. iBio Brazil commenced operations during the first quarter of the fiscal year ended June 30, 2015. iBio Brazil was inactive and in April 2021, management decided to discontinue its operations. This is not expected to have a material impact on the Company’s consolidated operations and in management’s opinion, exit costs are not expected to be material. As such, the net liabilities and operations of iBio Brazil were not classified as discontinued operations.

iBio Manufacturing LLC (“iBio Manufacturing”) – iBio Manufacturing, a wholly-owned subsidiary, is a Delaware limited liability company formed in November 2015. iBio Manufacturing has not commenced any activities to date.

2.   Basis of Presentation

Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared from the books and records of the Company and include all normal and recurring adjustments which, in the opinion of management, are necessary for a fair presentation in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information and Rule 8-03 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, these interim financial statements do not include all of the information and footnotes required for complete annual financial statements. Interim results are not necessarily indicative of the results that may be expected for the full year. Interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2020 filed with the SEC on October 13, 2020, as amended by a Form 10-K/A filed with the SEC on October 27, 2020 (the “Annual Report”), from which the accompanying condensed consolidated balance sheet dated June 30, 2020 was derived.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned and majority-owned subsidiaries. All intercompany balances and transactions have been eliminated as part of the consolidation.

Liquidity

The following is a summary of recent equity transactions that occurred:

1.On October 29, 2019, the Company closed on an underwritten public offering with total net proceeds of $4.5 million after deducting underwriting discounts, commissions and other offering expenses payable by the Company.
2.On March 19, 2020, the Company entered into a common stock purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), an Illinois limited liability company, pursuant to which Lincoln Park agreed to purchase from the Company up to an aggregate of $50,000,000 of the Company’s common stock, par value $0.001 per share (the “common stock”) (subject to certain limitations) from time to time over the 36-month term of the agreement (the “Lincoln Park March 2020 Purchase Agreement”). The Company terminated the Lincoln Park March 2020 Purchase Agreement effective July 27, 2020.  For the period from March 19, 2020 through July 27, 2020, Lincoln Park acquired 19.47 million shares of the Company’s common stock for gross proceeds of approximately $25.2 million.
3.In Fiscal 2020, the Company received proceeds of $6.3 million from the exercise of various warrants.

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4.On May 13, 2020, the Company entered into a purchase agreement (the “Lincoln Park May 2020 Purchase Agreement”), pursuant to which the Company agreed to sell to Lincoln Park and Lincoln Park agreed to purchase 1,000,000 shares of the Company’s common stock at a price of $1.09 per share for an aggregate purchase price of $1.1 million.
5.On June 17, 2020 as amended on July 29, 2020, the Company entered into an equity distribution agreement with UBS Securities, LLC ("UBS") as sales agent pursuant to which the Company could sell from time to time shares of its common stock through UBS, for the sale of up to $72,000,000 of shares of the Company's common stock. This “At-The-Market” facility included the remaining portion of the Lincoln Park facility. The offering was terminated by the Company on November 25, 2020. The Company issued 30.2 million shares of the Company’s common stock for net proceeds of approximately $68.83 million.
6.On November 25, 2020, the Company entered into a Controlled Equity OfferingSM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. ("Cantor Fitzgerald") to sell shares of common stock, from time to time, through an “at the market offering” program having an aggregate offering price of up to $100,000,000 through which Cantor Fitzgerald would act as sales agent (the “Sales Agent”). The issuance and sale, if any, of common stock by the Company under the Sales Agreement was subject to the effectiveness of our registration statement on Form S-3 (File No. 333-250973) (the “Registration Statement”), filed with the Securities and Exchange Commission on November 25, 2020.  The Registration Statement was declared effective by the Securities and Exchange Commission on December 7, 2020.
7.On December 8, 2020, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Cantor Fitzgerald as underwriter, pursuant to which the Company (i) agreed to issue and sell in an underwritten public offering (the “Offering”) 29,661,017 shares of common stock of the Company to Cantor Fitzgerald and (ii) granted Cantor Fitzgerald an option for 30 days to purchase up to an additional 4,449,152 shares of common stock that may be sold upon the exercise of such option by Cantor Fitzgerald. On December 10, 2020, pursuant to the terms of the Underwriting Agreement, 29,661,017 shares of common stock were purchased by Cantor Fitzgerald from the Company at a price of $1.0955 per share for net proceeds of approximately $32.3 million to the Company from the Offering, excluding any proceeds that were received from the exercise of the underwriter’s option to purchase additional shares, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company.
8.In January 2021, Cantor Fitzgerald notified the Company of its decision to partially exercise the option, and on January 11, 2021, the Company issued an additional 4,240,828 shares of common stock to satisfy the underwriter’s option exercise.  The Company received net proceeds of approximately $4.6 million.
9.On February 24, 2021, Cantor Fitzgerald sold as sales agent pursuant to the Sales Agreement 113,200 shares of common stock. The Company received net proceeds of approximately $238,000.
10.On May 7, 2021, Cantor Fitzgerald sold as sales agent pursuant to the Sales Agreement 1,716,800 shares of common stock. The Company received net proceeds of approximately $2.995 million.

See Note 12 – Stockholders’ Equity for additional information.

Based on the total cash and cash equivalents plus debt securities of approximately $103.9 million as of March 31, 2021, management believes the Company has adequate cash to support the Company’s activities through March 31, 2023.

3.   Summary of Significant Accounting Policies

Our significant accounting policies are described in Note 3 of the Notes to Financial Statements in the Annual Report.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates include liquidity assertions, the valuation of intellectual property, legal and contractual contingencies and share-based compensation. Although management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, actual results could differ from these estimates.

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Accounts Receivable

Accounts receivable are reported at their outstanding unpaid principal balances net of allowances for uncollectible accounts. We provide for allowances for uncollectible receivables based on our estimate of uncollectible amounts considering age, collection history, and other factors considered appropriate. Our policy is to write off accounts receivable against the allowance for doubtful accounts when a balance is determined to be uncollectible. At March 31, 2021 and June 30, 2020, we determined that an allowance for doubtful accounts was not needed.

Revenue Recognition

The Company accounts for its revenue recognition under Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers. Under this standard, the Company recognizes revenue when a customer obtains control of promised services or goods in an amount that reflects the consideration to which the Company expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts.

The Company’s contract revenue consists primarily of amounts earned under contracts with third-party customers and reimbursed expenses under such contracts. The Company analyzes its agreements to determine whether the elements can be separated and accounted for individually or as a single unit of accounting. Allocation of revenue to individual elements that qualify for separate accounting is based on the separate selling prices determined for each component, and total contract consideration is then allocated pro rata across the components of the arrangement. If separate selling prices are not available, the Company will use its best estimate of such selling prices, consistent with the overall pricing strategy and after consideration of relevant market factors.

In general, the Company applies the following steps when recognizing revenue from contracts with customers: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations and (v) recognize revenue when a performance obligation is satisfied. The nature of the Company’s contracts with customers generally falls within the three key elements of the Company’s business plan: CDMO Facility Activities; Product Candidate Pipeline, and Facility Design and Build-out / Technology Transfer services.

Recognition of revenue is driven by satisfaction of the performance obligations using one of two methods: revenue is either recognized over time or at a point in time. Contracts containing multiple performance obligations classify those performance obligations into separate units of accounting either as standalone or combined units of accounting. For those performance obligations treated as a standalone unit of accounting, revenue is generally recognized based on the method appropriate for each standalone unit. For those performance obligations treated as a combined unit of accounting, revenue is generally recognized as the performance obligations are satisfied, which generally occurs when control of the goods or services have been transferred to the customer or client or once the client or customer is able to direct the use of those goods and/or services as well as obtaining substantially all of its benefits. As such, revenue for a combined unit of accounting is generally recognized based on the method appropriate for the last delivered item but due to the specific nature of certain project and contract items, management may determine an alternative revenue recognition method as appropriate, such as a contract whereby one deliverable in the arrangement clearly comprises the overwhelming majority of the value of the overall combined unit of accounting. Under this circumstance, management may determine revenue recognition for the combined unit of accounting based on the revenue recognition guidance otherwise applicable to the predominant deliverable.

If a loss on a contract is anticipated, such loss is recognized in its entirety when the loss becomes evident. When the current estimates of the amount of consideration that is expected to be received in exchange for transferring promised goods or services to the customer indicates a loss will be incurred, a provision for the entire loss on the contract is made. During the nine months ended March 31, 2021, the Company recorded a reserve for the loss on a contract of $300,000.

The Company generates (or may generate in the future) contract revenue under the following types of contracts:

Fixed-Fee

Under a fixed-fee contract, the Company charges a fixed agreed upon amount for a deliverable. Fixed-fee contracts have fixed deliverables upon completion of the project. Typically, the Company recognizes revenue for fixed-fee contracts after projects are completed, delivery is made and title transfers to the customer, and collection is reasonably assured.

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Revenue can be recognized either 1) over time or 2) at a point in time and is summarized below (in thousands).

Three Months Ended

Nine Months Ended

    

March 31, 

    

March 31, 

2021

2020

2021

2020

Revenue recognized at a point in time

$

765

$

22

$

1,880

$

371

Revenue recognized over time

 

 

74

 

 

147

Total revenue

$

765

$

96

$

1,880

$

518

Time and Materials

Under a time and materials contract, the Company charges customers an hourly rate plus reimbursement for other project specific costs. The Company recognizes revenue for time and material contracts based on the number of hours devoted to the project multiplied by the customer’s billing rate plus other project specific costs incurred.

Contract Assets

A contract asset is an entity’s right to payment for goods and services already transferred to a customer if that right to payment is conditional on something other than the passage of time. Generally, an entity will recognize a contract asset when it has fulfilled a contract obligation but must perform other obligations before being entitled to payment.

Contract assets consist primarily of the cost of project contract work performed by third parties for which the Company expects to recognize any related revenue at a later date, upon satisfaction of the contract obligations. At both March 31, 2021 and June 30, 2020, contract assets were $0.

Deferred Revenue / Contract Liabilities

A contract liability is an entity’s obligation to transfer goods or services to a customer at the earlier of (1) when the customer prepays consideration or (2) the time that the customer’s consideration is due for goods and services the entity will yet provide. Generally, an entity will recognize a contract liability when it receives a prepayment.

Deferred revenue / Contract liabilities consist primarily of consideration received, usually in the form of payment, on project work to be performed whereby the Company expects to recognize any related revenue at a later date, upon satisfaction of the contract obligations. At March 31, 2021 and June 30, 2020, deferred revenue / contract liabilities were $886,000 and $1,810,000, respectively. The Company recognized revenue of $388,000 and $887,000 during the three and nine months ended March 31, 2021, respectively, that was included in the deferred revenue / contract liabilities balance as of June 30, 2020. The Company recognized revenue of $86,000 and $204,000 during the three and nine months ended March 31, 2020, respectively, that was included in the deferred revenue / contract liabilities balance as of June 30, 2019.

Leases

Effective July 1, 2019, the Company adopted ASU 2016-02, “Leases (Topic 842)” (“ASC 842”) and other associated standards using the modified retrospective approach for all leases entered into before the effective date. The new standard establishes a right-of-use (“ROU”) model requiring a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months and classified as either an operating or finance lease. The adoption of ASC 842 had a significant effect on the Company’s balance sheet, resulting in an increase in non-current assets and both current and non-current liabilities. The adoption of ASC 842 had no impact on accumulated deficit as the assets recognized under the Sublease and the associated lease obligation were accounted for as a capital lease under Leases (Topic 840) (“Topic 840”). The Company did not have any operating leases, therefore there was no change in accounting treatment required.  For comparability purposes, the Company will continue to comply with prior disclosure requirements in accordance with the then existing lease guidance under Topic 840 as prior periods have not been restated.

As the Company elected to adopt ASC 842 at the beginning of the period of adoption, the Company recorded the ROU and finance lease obligation as follows:

1.ROU measured at the carrying amount of the leased assets under Topic 840.
2.Finance lease liability measured at the carrying amount of the capital lease obligation under Topic 840 at the beginning of the period of adoption.

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The Company elected the package of practical expedients as permitted under the transition guidance, which allowed it: (1) to carry forward the historical lease classification; (2) not to reassess whether expired or existing contracts are or contain leases; and (3) not to reassess the treatment of initial direct costs for existing leases.

In accordance with ASC 842, at the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present and the classification of the lease including whether the contract involves the use of a distinct identified asset, whether the Company obtains the right to substantially all the economic benefit from the use of the asset, and whether the Company has the right to direct the use of the asset. Leases with a term greater than one year are recognized on the balance sheet as ROU assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less under practical expedient in paragraph ASC 842-20-25-2. For contracts with lease and non-lease components, the Company has elected not to allocate the contract consideration and to account for the lease and non-lease components as a single lease component.

The lease liability and the corresponding ROU assets were recorded based on the present value of lease payments over the expected remaining lease term. The implicit rate within our capital lease was determinable and, therefore, used at the adoption date of ASC 842 to determine the present value of lease payments under the finance lease.

An option to extend the lease is considered in connection with determining the ROU asset and lease liability when it is reasonably certain we will exercise that option. An option to terminate is considered unless it is reasonably certain we will not exercise the option.

For periods prior to the adoption of ASC 842, the Company recorded interest expense based on the amortization of the capital lease obligation.  The expense recognition for finance leases under Topic 842 is substantially consistent with prior guidance for capital leases. As a result, there are no significant differences in our results of operations presented.

Cash Equivalents

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.  Cash equivalents at March 31, 2021 consisted of money fund accounts.  The Company did not have any cash equivalents at June 30, 2020.

Investments in Debt Securities

Debt investments are classified as available-for-sale. Changes in fair value are recorded in other comprehensive income (loss). Fair value is calculated based on publicly available market information. Discounts and/or premiums paid when the debt securities are acquired are amortized to interest income over the terms of the debt securities.

Work in Process

Work in process consists primarily of the cost of labor and other overhead incurred on contracts that have not been completed. Work in process amounted to $432,000 and $798,000 as of March 31, 2021 and June 30, 2020, respectively.

Research and Development

The Company accounts for research and development costs in accordance with the Financial Accounting Standards Board (“FASB”) ASC 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved.

Right-of-Use Assets

Assets held under the terms of finance (capital) leases are amortized on a straight-line basis over the terms of the leases or the economic lives of the assets. Obligations for future lease payments under finance (capital) leases are shown within liabilities and are analyzed between amounts falling due within and after one year. See Note 11 - Finance Lease Obligation for additional information.

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Fixed Assets

Fixed assets are stated at cost net of accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from three to fifteen years.

Intangible Assets

The Company accounts for intangible assets at their historical cost and records amortization utilizing the straight-line method based upon their estimated useful lives. Patents are amortized over a period of ten years and other intellectual property is amortized over a period from 16 to 23 years. The Company reviews the carrying value of its intangible assets for impairment whenever events or changes in business circumstances indicate the carrying amount of such assets may not be fully recoverable. Evaluating for impairment requires judgment, and recoverability is assessed by comparing the projected undiscounted net cash flows of the assets over the remaining useful life to the carrying amount. Impairments, if any, are based on the excess of the carrying amount over the fair value of the assets. There were no impairment charges for the nine months ended March 31, 2021 and 2020.

Foreign Currency

The Company accounts for foreign currency translation pursuant to FASB ASC 830, Foreign Currency Matters. The functional currency of iBio Brazil is the Brazilian Real. Under FASB ASC 830, all assets and liabilities are translated into United States dollars using the current exchange rate at the end of each fiscal period. Revenues and expenses are translated using the average exchange rates prevailing throughout the respective periods. All transaction gains and losses from the measurement of monetary balance sheet items denominated in Reals are reflected in the statement of operations as appropriate. Translation adjustments are included in accumulated other comprehensive loss. For the three and nine months ended March 31, 2021 and 2020, any translation adjustments were considered immaterial and did not have a significant impact on the Company’s condensed consolidated financial statements.

Share-based Compensation

The Company recognizes the cost of all share-based payment transactions at fair value. Compensation cost, measured by the fair value of the equity instruments issued, adjusted for estimated forfeitures, is recognized in the financial statements as the respective awards are earned over the performance period. The Company uses historical data to estimate forfeiture rates.

The impact that share-based payment awards will have on the Company’s results of operations is a function of the number of shares awarded, the trading price of the Company’s stock at the date of grant or modification, the vesting schedule and forfeitures. Furthermore, the application of the Black-Scholes option pricing model employs weighted-average assumptions for expected volatility of the Company’s stock, expected term until exercise of the options, the risk-free interest rate, and dividends, if any, to determine fair value.

Expected volatility is based on historical volatility of the Company’s common stock; the expected term until exercise represents the weighted-average period of time that options granted are expected to be outstanding giving consideration to vesting schedules and the Company’s historical exercise patterns; and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The Company has not paid any dividends since its inception and does not anticipate paying any dividends for the foreseeable future, so the dividend yield is assumed to be zero. In addition, the Company estimates forfeitures at each reporting period, rather than electing to record the impact of such forfeitures as they occur. See Note 14 - Share-Based Compensation for additional information.

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Down Round Features

The Company accounts for certain equity-linked financial instruments in accordance with ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815) (“ASU 2017-11”). The amendments in Part I of ASU 2017-11 change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (“EPS”) in accordance with ASC 260 to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in ASC 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in ASC 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of ASC 480 that now are presented as pending content in the codification, to a scope exception. Those amendments do not have an accounting effect.

Concentrations of Credit Risk

Cash

The Company maintains principally all cash balances in two financial institutions which, at times, may exceed the insured amounts. The exposure to the Company is solely dependent upon daily balances and the strength of the financial institutions. The Company has not incurred any losses on these accounts. At March 31, 2021 and June 30, 2020, amounts in excess of insured limits were approximately $34,229,000 and $54,680,000, respectively.

Revenue

During the three months ended March 31, 2021, the Company generated 100% of its revenue from three customers with one customer accounting for 92% of revenue. During the three months ended March 31, 2020, the Company generated 100% of revenue from two customers with one customer accounting for 78% of revenue.

During the nine months ended March 31, 2021, the Company generated 100% of its revenue from four customers, none of which singularly accounted for more than 50% of revenues. During the nine months ended March 31, 2020, the Company generated 100% of its revenue from five customers, one of which singularly accounted for 31% of revenues.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires an entity to assess impairment of its financial instruments based on its estimate of expected credit losses. Since the issuance of ASU 2016-13, the FASB released several amendments to improve and clarify the implementation guidance. In November 2019, the FASB issued ASU 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date of the various topics. As the Company is a smaller reporting company, the provisions of ASU 2016-13 and the related amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 (quarter ending September 30, 2023 for the Company). Entities are required to apply these changes through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company will evaluate the impact of ASU 2016-13 on the Company’s condensed consolidated financial statements in a future period closer to the date of adoption.

Effective July 1, 2019, the Company adopted ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). ASU No 2018-07 expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The guidance also specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The adoption of ASU 2018-07 did not have a significant impact on the Company’s condensed consolidated financial statements.

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In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”) to reduce the cost and complexity in accounting for income taxes. ASU 2019-12 removes certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. ASU 2019-12 also amends other aspects of the guidance to help simplify and promote consistent application of U.S. GAAP. The guidance is effective for fiscal years and for interim periods within those fiscal years, beginning after December 15, 2020 (quarter ending September 30, 2021 for the Company), with early adoption permitted. An entity that elects early adoption must adopt all the amendments in the same period. Most amendments within ASU 2019-12 are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The Company is currently evaluating the impact of ASU 2019-12 on the Company’s condensed consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying condensed consolidated financial statements. Most of the newer standards issued represent technical corrections to the accounting literature or application to specific industries which have no effect on the Company’s condensed consolidated financial statements.

4.   Financial Instruments and Fair Value Measurement

The carrying values of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses in the Company’s condensed consolidated balance sheets approximated their fair values as of March 31, 2021 and June 30, 2020 due to their short-term nature. The carrying value of the convertible promissory note receivable and finance (capital) lease obligation approximated fair value as of March 31, 2021 and June 30, 2020 as the interest rates related to the financial instruments approximated market.

The Company accounts for its investments in debt securities at fair value. The following provides a description of the three levels of inputs that may be used to measure fair value under the standard, the types of plan investments that fall under each category, and the valuation methodologies used to measure these investments at fair value.

Level 1 – Inputs are based upon unadjusted quoted prices for identical instruments in active markets.
Level 2 – Inputs to the valuation include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.  All debt securities were valued using Level 2 inputs.
Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

5.   Convertible Promissory Note Receivable

On October 1, 2020, the Company entered into a master services agreement with Safi Biosolutions, Inc. (“Safi”). In addition, the Company invested $1.5 million in Safi in the form of a convertible promissory note (the "Note"). The Note bears interest at the rate of 5% per annum and is convertible into shares of Safi’s common stock (as defined). Principal and accrued interest mature on October 1, 2023.  For the three and nine months ended March 31, 2021, interest income amounted to $18,000 and $37,000, respectively. As of March 31, 2021, the Note balance and accrued interest totaled $1,537,000.

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6.   Investments in Debt Securities

Investments in debt securities consist of AA and A rated corporate bonds bearing interest at rates from 0.26% to 4.25% with maturities from April 2021 to December 2022. The components of investments in debt securities are as follows (in thousands):

    

March 31, 

2021

Adjusted cost

$

19,332

Gross unrealized losses

 

(36)

Fair value

$

19,296

The fair value of available-for-sale debt securities, by contractual maturity, as of March 31, 2021, was as follows (in thousands):

Fiscal period ending on March 31:

Fair Value

2021

$

6,875

2022

 

12,421

$

19,296

Amortization of premiums paid on the debt securities amounted to $80,000 and $130,000 for the three and nine months ended March 31, 2021, respectively.

7.   Finance Lease ROU’s

As discussed above, the Company adopted ASC 842 effective July 1, 2019 using the modified retrospective approach for all leases entered into before the effective date.

iBio CDMO is leasing its facility in Bryan, Texas as well as certain equipment from the Second Eastern Affiliate under the Sublease. See Note 11 – Finance Lease Obligation for more details of the terms of the Sublease.

The economic substance of the Sublease is that the Company is financing the acquisition of the facility and equipment. As the Sublease involves real estate and equipment, the Company separated the equipment component and accounted for the facility and equipment as if each were leased separately.

The following table summarizes by category the gross carrying value and accumulated amortization of finance lease ROU (in thousands):

    

March 31, 

    

June 30, 

2021

2020

ROU - Facility

$

25,761

$

25,761

ROU - Equipment

 

7,728

 

7,728

 

33,489

 

33,489

Accumulated amortization

 

(7,109)

 

(5,873)

Net finance lease ROU

$

26,380

$

27,616

Amortization of finance lease ROU assets was approximately $406,000 and $416,000 for three months ended March 31, 2021 and 2020, respectively. Amortization of finance lease ROU assets was approximately $1,236,000 and $1,246,000 for the nine months ended March 31, 2021 and 2020, respectively.

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8.   Fixed Assets

The following table summarizes by category the gross carrying value and accumulated depreciation of fixed assets (in thousands):